Will Rosenzweig on Food-Based Businesses

By Barbara Quick | Small Business

[Image Credit - Jonathan Cherry]

Is this a good time to start a food-related business?

Increasingly, savvy consumers are pushing their shopping
carts past the center aisles of the grocery store—away from the Big Brands and
their packaged foods that seduced the public with convenience in exchange for
chemical additives widely suspected both of compromising our health and making
us fat.

Long-time food industry insiders are calling this “the most dynamic,
disruptive, and transformational time” of their careers. Iconic American
food manufacturers, desperate to paint their public image green—and, in the
process, re-gain market share—are paying big bucks to populate their corporate
houses with the most promising, sustainable, well-thought-out natural-foods
ventures that money can buy.

Sounds like easy pickings for someone with a delicious
family recipe or a great new disruptive idea that will change and improve the
way we eat, doesn’t it?

Is this a good time, we wanted to know, to start a
food-based venture?

Will gave us his first answer to our question—the Zen
answer—with a story about a transformational moment from his past, long before
he himself became a trusted elder statesman in the world of socially conscious,
disruptive food startups.

It was 1990. Will Rosenzweig was a young, idealistic
entrepreneur attending his first Social Venture
Network conference, where he profited from the wisdom and advice of a
star-studded lineup of company founders and CEOs with roots in the peace
activism of the 1960s. “Ben Cohen, of Ben and Jerry’s, was there. Gary
Erickson, of Clif Bar; Paul Hawken, of Smith & Hawken; and Gary Hirshberg,
of Stonyfield Farm, were there. Jeffrey Hollender, of Seventh Generation, and
Paul Katz, of Rockport Shoes, were there, too. All of them had set out to
create brands that had a purpose and a cause to them. But instead of
protesting, they were trying to do it with profit.”

Will found his mentor at that conference, Mel Ziegler, the
founder of Banana Republic who became co-founder, with Will Rosenzweig and
Patricia Ziegler, of the Republic of Tea. “I asked Mel,” Will told Yahoo,
“‘When is the right time to start a business?’ And his response was, ‘Never and
always.’”

The same enigmatic answer apparently holds true now. “On the
one hand,” says Will, “it’s a great time to start a food business. Barriers to
entry are relatively low. But there’s so much competition out there now, that
it’s disproportionately difficult to scale up and succeed.”

Will, who won the Oslo Business
for Peace Award in 2010, admits that he’s “somewhat perturbed with people
who think they’ve just now discovered the business model of ‘doing good while
doing well,’ which has been around for the past 25 years.” He notes, however, a
huge and significant shift in the psychic landscape of the professional world
since then. “The millennial generation is the first generation willing to trade
upside on their compensation for meaning in their lives. They would rather make
less money doing meaningful work than work for more money in a soulless job.”

Health and Sustainability

Food, says Will Rosenzweig, is “the quintessential and
catalytic substance that now makes the two biggest issues of our time personal:
health and sustainability. We finally understand—the Buddhists have been saying
this for 3,000 years—that everything is interconnected. Now we have empirical
proof that the way we grow our beef has a huge impact on the quality of our
air. The way we fertilize our crops has a huge impact on the fertility of our
soil, which ultimately affects the nutritional quality of our food, which
affects our heart, our cholesterol, our immune system. The epiphany has been
that we should really care about these issues.”

We asked the UC Berkeley Haas School of Business professor
to zero in on the “doing well” part of the equation. After all, entrepreneurs
from all over the world are turning to the Food Business School for help in
starting or expanding a business in what the school’s founder calls “this
really magical sector at the crossroads of the two biggest issues of our time.”

An avid organic gardener with one foot in a very
contemplative world, Will Rosenzweig is nonetheless a tough critic and coach
when it comes to making sure that would-be entrepreneurs are well prepared to
face the scrutiny and skepticism of investors. He’s an investor himself. One of
the hats he wears is as co-founder and managing partner of Physic Ventures, touted as the first
venture capital firm dedicated to projects and products that promote global
human health. He knows the small business landscape from both sides of the
table, as someone who has been closely involved in the beginnings of many
companies in the health and sustainability sector —and as someone trying to
identify the new business ventures most likely to succeed.

Many new entrepreneurs make the mistake, Will told us, of
going to investors with a product that is simply not differentiated enough from
other similar products already out there. “Because everybody eats, everybody
thinks they’re a food expert. But starting a food business is a lot harder than
it looks.”

Before you even think about approaching investors, cautions
Will, you need to acquire a thorough understanding of these seven essential
areas of knowledge as they relate to your product or service:

Culinary expertise. It’s one thing to make something in your home kitchen that tastes great. But if you want to grow a food-based business, you’ve got to figure out how to deliver great taste at scale.

Supply chains. Do you have a low-cost, particularly secure or otherwise unique supply source that will give you a competitive advantage?

Food safety. What are all the safety rules and scientific principles that apply to the storage, transportation and consumption of your product? Investors are going to want to know that what you sell isn’t going to harm people.

Distribution. You need a detailed and strategic plan for getting your product into the hands and bellies of consumers.

Marketing and Promotion. Do you have someone on your team with expertise in creating and promoting a brand? How are you going to target the people most likely to fall in love with your product and make a habit out of consuming it?

Food policy and food law. You need to do research about federal, local and, if relevant, international rules and regulations you’re going to have to follow.

Consumer trends and consumer tastes. Read the relevant trade magazines. Create focus groups to sample your product—and listen to what they say. Attend fancy food or specialty food trade shows. And talk to people who have done all of this before, who can help you avoid mistakes that might make the difference between success and failure.

Creating Success

We asked Will to identify the three primary things that tip
him off that a given venture, in its startup phase, is likely to be successful.

“Okay,” he said with a smile. “One: People. Two: People. And
three: People. It’s really all about people.”

Food attracts a lot of artsy, creative types, says
Will—“people who don’t necessarily know how to bring their creativity together
with the disciplines of business execution and financial rigor.” At the Food Business School, he and his
colleagues help build entrepreneurial teams. “We are on the lookout for
people,” says Will, “who have the grit, commitment and vision required for
success.”

Here’s what Will Rosenzweig told Yahoo about the five most
common mistakes made by food industry start-ups:

Not accurately sizing the market and the opportunity: “It’s more difficult than you might think to identify how many people will be interested in
your product.”

Underestimating the challenge of acquiring customers in an overcrowded market.

Underestimating the amount of time and capital required to be successful.

Underestimating the complexity of assembling a high-quality team and bringing them to a high level of performance.

Mistaking the head-nod of excitement for true market validation: “Just because a rep from Whole Foods tells you that he loves your product, there’s no guarantee that Whole Foods is going to put your product on their shelves.”

With its large and flexible array of courses and certificate
programs, the Food Business School serves people at different stages of their
entrepreneurial journey: those who want to explore and polish an idea for a
business; those who are ready to pressure-test an idea; and those who are
already in the early stages of their business—and/or are looking to be
acquired.

The bottom line? “You have to be able to do a lot of things
right to turn a food product into a scalable business.”